Nearly one-third of family offices in the Asia Pacific region named geopolitics as the top concern, according to a UBS report, partly reflecting rising tensions in US-China relations.
31 percent of family offices in APAC selected global geopolitical circumstances as the top concern in the next two to three years, according to the «UBS Global Family Office Report 2023».
This follows worries about liquidity tapering or higher rates (17 percent) and a rise in inflation rates (12 percent).
Geopolitical risk was the top worry in nearly all regions, including Switzerland (49 percent), Europe (37 percent), Latin America (26 percent) and APAC, with the exception of the US which chose recession risk (23 percent).
Liquidity Boost
According to LH Koh, co-head of global family and institutional wealth APAC at UBS Global Wealth Management, there has been a growing focus on fixed income liquidity to adjust to this shift in geopolitical risk, alongside other risks.
The bank is seeing increasing flows into high-grade, short-dated bonds, Koh said during a media briefing attended by finews.asia, in line with the interest rate cycle.
Overall, family offices in the region allocated 15 percent to fixed income in 2022, including 11 percent in developed markets and 4 percent in emerging markets.
Diversification to Alts
Concurrently, APAC family offices are seeking to add risk via alternatives, most notably in hedge funds which saw allocations grow from 3 percent to 5 percent in 2022.
The region stands out in the asset class as 43 percent prefer the use of hedge funds for diversification, compared to 33 percent worldwide.
Overall, 39 percent was allocated to alternatives in Asia which, according to the bank's definition, also include private markets, real estate, precious metals, commodities, art and infrastructure.
Top Equity Investor
On equities, APAC family offices were the leader by allocation globally at 37 percent with 28 percent in developed markets and 9 percent in emerging markets. And on the back of expectations of a peaking US dollar and optimism from China's reopening, 35 percent are planning increases to emerging market equities.
«In light of potential inflection points […] this year’s report shows that family offices are planning the biggest shift in strategic asset allocation for several years. Following the end of close-to-zero interest rates, balanced portfolios with active management are returning to favor,» UBS added.
The Swiss bank's annual report is in its fourth edition and is based on a survey of 230 single family offices around the world, including 45 in APAC, with a total net worth of $495.8 billion and an average net worth of $2.2 billion.
